- IPOs of US SPACs exceeded $8.8bn during 3 Jan-25 Mar 2022
- Uncertain regulatory environment compels SPACs to exclude Chinese targets
A total of 53 special purpose acquisition company (SPAC) initial public offerings (IPOs) were priced in the US in the first 12 weeks of 2022, raising $8.8bn, with about one-fifth of them being not in favor of completing de-SPAC transaction with any entity that had principal business operations in China (including Hong Kong and Macau), reveals GlobalData, a leading data and analytics company.
Keshav Kumar Jha, Business Fundamentals Analyst at GlobalData, comments: “Concerns about Chinese entities failing to secure local governments’ permission to follow the guidelines of the Holding Foreign Companies Accountable Act (HFCAA) could be one of the factors influencing the initial business combination decision of SPACs.
“Besides, Beijing's crackdown on big technology firms in recent times also a factor for the blank check companies’ decision to remove Chinese firms from their areas of interest.”
HFCAA, brought into effect by the Securities and Exchange Commission (SEC) in December 2020, mandates all companies listed on US exchanges to provide evidence of their auditing inspections and furnish documents to prove that the registrants are not owned or controlled by a governmental entity in a foreign jurisdiction.
Jha continues: “The decision of SPACs is also seems to be influenced by the Cyberspace Administration of China’s (CAC) new rules that require a platform company with data for over one million users to apply for cybersecurity reviews before submitting overseas listing applications.”
China’s tougher offshore IPO listing rules and the US SPACs decision to exclude Chinese entities from de-SPAC transactions could leave capital-hungry startups dry. Smaller startups may consider getting merged with blank check firms to accelerate their expansion as SPAC is a quicker and more economical way for a company to go public.
The Chinese startups could find some respite amid the growing exclusion by the US SPACs, as Singapore and Hong Kong relaxed rules to allow blank check companies to get listed on the mainboards of bourses.
Read: Singapore may emerge as new hotspot for SPAC IPOs, says GlobalData
Jha concludes: “In January 2022, Hong Kong stock exchange (HKEX) started accepting SPAC IPO applications and reported the listing of its first SPAC, China Merchants-backed Aquila Acquisition Corp in March, which raised approximately $128m. As of 25 March 2022, HKEX received 10 more IPO applications from SPACs, which are backed mostly by Chinese entrepreneurs and investors.”
